New Key Problem
 

Just had a new key cut for my 95 325ic. Problem even the locksmith is stumped by. Curious to know if anyone else has had this problem.

New key locks and unlocks all door, trunk, glove box and even works the ignition.
New key will not start the engine, remove new key. Use old key to crank car.
Turn off engine, insert new key, starts engine. Will restart engine repeatedly until you let the car be off for a few minutes (long enough to gas up) then new key will not work.

Go through steps of using old key then using new key and it works.
Irritating and defeats the reason for having a new key made!!

I understand the 95's did not have a microchip embedded in the key-head. If that's correct any ideas on the problem?
It is a puzzling one.

I am pretty certain that a '95 has a chip in the key.

Try this - when the new key fails to start, hold the old key up as close as possible to the ring around the key hole and see if the car starts.